IndusInd Bank is expected to report a 48 percent jump in net profit for the October-December quarter on the back of a robust 18 percent growth in net interest income, and reduction in provisioning.
The average estimate of five brokerages polled, puts the net profit for the private sector lender at Rs 1,836 crore for the reported quarter and a net interest income of Rs 3,793 crore. The bank had reported a net profit of Rs 1,241 crore in the corresponding quarter of the previous financial year.
In an early business update for the quarter, IndusInd Bank reported a loan growth of 19 percent year-on-year (YoY), faster than the previous seven quarters. Analysts took this as a sign of robust business growth momentum which augurs well for the bank’s core interest income growth and operating performance.
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That said, the bank saw a slight deceleration in its deposit growth to 14 percent YoY from 15 percent in the previous quarter. This is despite the bank hiking deposit rates by a big margin during the quarter to attract flows. That said, retail deposit growth has remained resilient.
“The management is making consistent progress on shoring up its Retail deposit mix. Currently, the Retail/Small Business deposits segment forms 42.4 percent of the total deposits,” note analysts at Motilal Oswal Financial Services said.
Deposit rate hikes have been followed with interest rate hikes on loans as well and therefore margins are likely remain steady, according to analysts. This too will add to the core interest income growth for the bank.
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Another factor to boost net profit is the reduction in provisions expected for the quarter. Analysts at Elara Securities expect a 24 percent YoY drop in provisions, thereby taking the net profit growth up. “With uptick in collection efficiency, lesser flow-through from the restructured pool, we expect incremental stress to moderate and GNPAs too to further settle lower,” wrote those at ICICI Securities in a note.
One drag on IndusInd Bank’s operating profit, which is expected to show a modest 10 percent growth, is operating expenses. “Scale-up of retail, investment in franchise expansion and technology initiatives are expected to drive up cost structure,” wrote analysts at ICICI Securities. The lender’s management has indicated that cost to income ratio could remain elevated at around 44 percent.
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